February 20, 2006

Sony shares dropped sharply Monday in Tokyo after an analyst report rekindled concerns the company may delay the sales of its new video game console, although the company denied any change in plans.

The worries stemmed from a Merrill Lynch report late last week highlighting market rumors about a delay in the sales start for the PlayStation 3 video game console, which the Japanese entertainment and electronics manufacturer has promised for this spring.

Masami Nakamura, spokeswoman for Sony Computer Entertainment, Sony’s game unit, denied changes in that target timeframe, although the company is not giving a specific launch date.

“We’re aiming for spring, but we haven’t announced specific regions,” a spokeswoman for Sony Computer Entertainment said, adding that it was waiting for the final specifications on some of the technology it is using in the PS3, such as that related to the Blu-ray DVD drive and to input and output video and sound.

The specifications are decided by industry consortiums.

“We’re waiting for them until the last possible minute, but the launch could be pushed back if they’re not decided soon,” the spokeswoman said. If the PS3 is not ready in time, the company will choose the next best timing for the launch, she said.

If you are waiting for an industry consortium to decide a specification, you’re standing still. That’s not even a good scapegoat. As for the Merrill Lynch report:

Sony has indicated a Spring launch for its console in Japan and the industry is not expecting a North American launch until November. But Hitoshi Kuriyama of Merrill Lynch in Japan says there are reports that the PS3 could be delayed by between six and 12 months, meaning an autumn launch in Japan and a late 2006 or early 2007 launch in the US.

Thereby handing the Xbox 360 a big lead.

Also, Merrill Lynch analysts in San Francisco have estimated that the initial bill of materials for PS3 could approach $900, falling to $320 by three years after launch.

All consoles are subsidized, but $900 would indicate a significantly higher price or a significantly higher subsidy than the Xbox 360.

Update 2/23: Michael Kanellos at CNET has a detailed treatment of the PS3 cost estimates. The Blu-ray drive and Blu-ray support accounts for $200-300 of the cost compared to $20 for a conventional DVD in the Xbox 360. The PS3 processor is more expensive as well.